Tuesday, June 1, 2010

What Did the Willbros Monitor Find?

In May 2008, Willbros Group Inc. settled joint DOJ and SEC enforcement actions. See here and here.

The DOJ criminal information (see here) charges "Willbros with one count of conspiring to make bribe payments to Nigerian and Ecuadoran officials, two counts of violating the FCPA in connection with the authorization of specific corrupt payments to officials in those countries and three counts of violating the FCPA by falsifying books and records relating to corrupt payments and a tax fraud scheme." See here for the DOJ release.

As is frequently the case, these criminal charges were not actually prosecuted, but were deferred pursuant to a deferred prosecution agreement (DPA) (see here).

The DPA lasts for approximately three years.

If the company fully complies with all of its obligations during the term of the DPA, the DOJ will dismiss the criminal charges against Willbros.

On the other hand, if the company fails to comply with all of its obligations during the term of the DPA, such as by violating the FCPA again, Willbros will "be subject to prosecution for any federal criminal violation of which the [DOJ] has knowledge."

In addition, the DPA "does not provide any protection against prosecutionfor any corrupt payments or false accounting, if any, made in the future" by Willbros "or any of their directors, officers, employees, agents or consultants, irrespective of whether disclosed by [Willsbros] pursuant to the terms" of the DPA. Nor does the DPA "provide any protection against prosecution for any corrupt payments made in the past which are not described in the [deferred charges] or were not disclosed to the [DOJ] prior to the date on which [the DPA] was signed."

Enter the Willbros compliance monitor - a condition often imposed on a company pursuant to an FCPA DPA (or NPA).

In the FCPA context, a monitor does many things.

Most of these things are forward-looking - such as ensuring that the company "gets it" - that it is adhering to the terms of the DPA, and making the changes it said it was going to make so that it will never again be subject to FCPA scrutiny.

Like most monitors, the Willbros monitor was authorized to disclose to the DOJ should the monitor "discover credible evidence that questionable or corrupt" may have been offered, promised, paid, or authorized by Willsbros.

The filing includes an update on the company's DPA obligations and the work of the monitor. Much of the discussion is fairly routine.

Except this paragraph.

"The [monitor's report recently delivered to the DOJ] also sets out for the DOJ’s review the monitor’s findings relating to incidents that came to the monitor’s attention during the course of his review which he found to be significant, as well as recommendations to address these incidents. We and the monitor have met separately with the DOJ concerning certain of these incidents. The monitor, in his report, did not conclude whether any of these incidents or any other matters constituted a violation of the FCPA. We do not believe that any of these incidents or matters constituted a violation of the FCPA based on our own investigations of the incidents and matters raised in the report. Notwithstanding our assessment, the DOJ could perform further investigation at its discretion of any incident or matter raised by the report."

It is unusual, so soon after an FCPA enforcement action, for a monitor to find additional facts that require investigation.

Why?

Because during settlement of an FCPA enforcement action, it is common for the enforcement agencies to ask the "where else" question. Thus, if the Willbros enforcement action followed the usual course, once DOJ/SEC got comfortable with the Nigeria and Ecuador facts, it is likely the enforcement agencies said something to the effect "well, if you did it in Nigeria and Ecuador, convince us you didn't do it as well in countries x,y, and z." To answer that question, the company is then often forced to conduct a general, high-level world-wide review of its entire operations. If problematic facts are found, it is in the company's best interest (and the best interest of the enforcement agencies as well) to wrap-up these "tag-a-long" facts into the same enforcement action.

Against this backdrop, it is a bit surprising that problematic facts have arisen so soon after the Willbros FCPA enforcement action.

Was the assumed high-level world-wide review insufficient? Did Willbros perhaps commit another FCPA violation post-enforcement action, yet while still subject to the DPA.?

As indicated by Willbros' filing, the company states its opinion that none of this new conduct constitutes a violation of the FCPA.

However, it is unusual to have a monitor find additional problematic facts, and for the DOJ to investigate those facts, so soon after an FCPA enforcement action.

If the "new" facts do indeed give rise to an independent FCPA violation, Willbros could be subject to prosecution on the "new" facts and the current criminal charges deferred against Willbros could again become active.